The deal would see Heineken sell its China business to China Resources Beer Holding Company Limited (CRH Beer Ltd) in exchange for a 40% stake in the company. CRH Beer is the parent company of CR Beer, China’s largest beer company and maker of popular Snow beer in China.
The transaction which is worth $3.1bn will give Heineken a strong local partner in a market where it has had difficulty gaining market share ever since it entered the market in 1983.
The deal will see the Dutch brewer transfer its operations (three breweries) to CR Beer and license its Heineken brand in China, Hong Kong and Macau to the Chinese brewer for $305.8m, while CR Beer will acquire 0.9% stake in Heineken (5.2 million shares) for €464m ($537.5m).
Altogether, these transactions will result in a net investment of €1.9bn ($2.2bn) by Heineken.
Heineken hopes to grow its premium Heineken brand in a market where it has struggled for years and only holds 0.5% market share to CR Beer’s 25% and AB InBev’s 16%.
And for CR Beer, it hopes to finally begin to have a presence in the lucrative premium category. While the Chinese beer market is largely a low cost beer market, where CR Beer holds sway with 25% market share, the lucrative premium beer segment has remained elusive for the Chinese company, ceding the segment to foreign players like AB InBev’s Budweiser and Carlsbad, which have been driving growth in a sector that is expected to expand by 21% to $106 billion in just four years.
In a statement, the Dutch Brewer said, “The completion of the transactions enables Heineken, CRE and CR Beer to now start the implementation of their strategic partnership.”
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